Our slow-burn social and economic issues
With governments bleeding red ink, an aging population and anaemic growth European leaders focus almost exclusively on getting their economies growing while at the same time reducing their borrowing levels. Austerity has become a magic word that we are likely to continue hearing for several more years.
Sadly the more daunting challenges of the future are the slow-burn social and economic issues that are acknowledged as being very serious even if we are not doing much to address them. Malcolm Prowle and Roger Latham, two senior academics at Nottingham Business School outline in their recently published book “Public finances in an age of austerity: Getting out of the hole” these slow-burn issues very graphically.
The impact of an aging population is well known and various studies by international institutions like the IMF have clearly spelled out the serious consequences for various countries if not enough is done to mitigate these consequences. This demographic phenomenon goes beyond the concern of securing a decent pension to those who retire from work. Few governments have so far pencilled in their long-term financial plans the cost of providing older people with health and social care at a time when the number of people in employment is decreasing.
Another slow-burn issue is the effect of societal changes that have happened in the last two or three decades. The loss of the nuclear family, the increasing rate of female employment, and the rising number of elderly people living alone are exerting immense pressures on communities. Our society is finding it difficult to preserve the social cohesion that we all believe to be indispensable for the good of our society. This in turn is giving rise to increasing disparities in income and wealth and the emergence of a two-tier society where inequalities in health, education and employment are becoming ever more pronounced.
The scientific and technological progress in the medical field in the last 50 years have built understandable expectations in our society that the state should provide the best level of medical care for anyone who may need it. Organ transplants, CT and MRI diagnostic scanners and modern chemotherapy are today considered commonplace solutions that patients and their relatives expect to be applied whatever the cost to public finances may be. This trend will continue as new gene therapies and drugs are discovered.
The political answer to these challenges is often encapsulated in the statement that as long as we can get economic growth growing the state can meet the rising expectations of our society. But what happens if we are likely to face a long stretch of economic stagnation as many economists are predicating?
Prowle and Letham are amongst a growing number of business academics who believe that Europe, and indeed most of the developed economies, could experience long-term economic slowdown as a result of “climate change, depletion of natural resources and changing economic powers”. With developing countries of the world aspiring for western style affluence, the pressures on our environment are multiplying at an alarming rate. Perhaps of more economic significance to western economies, there is clear evidence that economic power is shifting from the West towards Asia making the prospects of strong economic growth to resolve our socio-economic challenges no more than wishful thinking.
If the present low levels of economic growth in European countries develop into a long-term trend, then we need to resort to some radical thinking. Prowle and Latham acknowledge that there are major political obstacles and organisational inertia working against the implementation of major reform. They believe that the solution lies in “radically dismantling the hierarchical bureaucracies of the public sector and genuinely empowering the front line in a series of co-ordinated social enterprises rather than a monolithic single provider”.
The economic boom experienced in the last two decades has created significantly increased levels of inequality that now need to be redressed. The focus of any government in today’s economic context should be to mitigate “the impact of inequalities on education, health, law and order, and community cohesion”.
So far we have few blueprints that guarantee us success in the reforms that are needed to reduce the culture of dependence through the empowerment of individuals while at the same time restoring community cohesion. We must not focus solely on promoting austerity and dream about the return of the good old times. The time is right to start tackling the slow-burn issues that threaten the long-term prosperity of our society.